In Holmdel Builder's Association v. Holmdel Township, 121 N.J.
550 (1990), the New Jersey Supreme Court determined that mandatory
development fees are authorized by the Fair Housing Act of 1985 (the
Act), N.J.S.A. 52:27D-301 et seq., and the State Constitution, subject
to the Council on Affordable Housing's (COAH's) adoption
of rules.

Pursuant to P.L. 2008, c. 46, section 8 (N.J.S.A. 52:27D-329.2) and
the Statewide Nonresidential Development Fee Act (N.J.S.A. 40:55D-8.1
through 8.7), COAH is authorized to adopt and promulgate regulations
necessary for the establishment, implementation, review, monitoring,
and enforcement of municipal affordable housing trust funds and corresponding
spending plans. Municipalities that are under the jurisdiction of
the Council or court of competent jurisdiction and have a COAH-approved
spending plan may retain fees collected from nonresidential development.

In the Matter of the Adoption of N.J.A.C. 5:96 and 5:97 by the New
Jersey Council on Affordable Housing, 221 N.J. (2015), the New Jersey
Supreme Court found that the COAH administrative process had become
nonfunctioning, and as a result, returned primary jurisdiction over
affordable housing matters to the trial courts. Until and unless COAH
adopts new regulations or a new statute is passed, any and all references
to COAH herein shall mean the trial courts or any agency that supersedes
COAH.

This chapter establishes standards for the collection, maintenance,
and expenditure of development fees pursuant to COAH's regulations
and in accordance with P.L. 2008, c. 46, Sections 8 and 32 through
38 (N.J.S.A. 52:27D-329.2 and 40:55D-8.1 through 8.7). Fees collected
pursuant to this chapter shall be used for the sole purpose of providing
low- and moderate-income housing. This chapter shall be interpreted
within the framework of COAH's rules on development fees, codified
at N.J.A.C. 5:93-8.

A development included in the Housing Element and Fair Share
Plan, and includes, but is not limited to, an inclusionary development,
a municipal construction project, or a one-hundred-percent affordable
development.

The New Jersey Council on Affordable Housing established
under the Fair Housing Act, which previously had primary jurisdiction
for the administration of housing obligations in accordance with sound
regional planning consideration in the State. Pursuant to In the Matter
of the Adoption of N.J.A.C. 5:96 and 5:97 by the New Jersey Council
on Affordable Housing, 221 N.J. (2015), the New Jersey Supreme Court
returned primary jurisdiction over affordable housing matters to the
trial courts. As such, until and unless COAH adopts new regulations
or a new statute is passed, any and all references to COAH shall mean
the trial courts or any agency that supersedes COAH.

The legal or beneficial owner or owners of a lot or of any
land proposed to be included in a proposed development, including
the holder of an option or contract to purchase, or other person having
an enforceable proprietary interest in such land.

The assessed value of a property divided by the current average
ratio of assessed to true value for the municipality in which the
property is situated, as determined in accordance with Sections 1,
5, and 6 of P.L. 1973, c. 123 (N.J.S.A. 54:1-35a through 54:1-35c).

Those strategies that minimize the impact of development
on the environment and enhance the health, safety, and well-being
of residents by producing durable, low-maintenance, resource-efficient
housing while making optimum use of existing infrastructure and community
services.

Residential developers, except for developers of the types of development
specifically exempted, shall pay a fee of 1% of the equalized assessed
value for residential development, provided that no increased density
is permitted.

When an increase in residential density pursuant to N.J.S.A. 40:55D-70d(5)
(known as a "d" variance) has been permitted, developers may be required
to pay a development fee of 6% of the equalized assessed value for
each additional unit that may be realized. However, if the zoning
on a site has changed during the two-year period preceding the filing
of such a variance application, the base density for the purposes
of calculating the bonus development fee shall be the highest density
permitted by right during the two-year period preceding the filing
of the variance application.

Example: If an approval allows four units to be constructed on a
site that was zoned for two units, the fees could equal 1% of the
equalized assessed value on the first two units and the specified
higher percentage up to 6% of the equalized assessed value for the
two additional units, provided that zoning on the site has not changed
during the two-year period preceding the filing of such a variance
application.

Developments that have received preliminary or final site plan approval
prior to the adoption of a municipal development fee ordinance shall
be exempt from development fees, unless the developer seeks a substantial
change in the approval. Where a site plan approval does not apply,
a zoning and/or building permit shall be synonymous with preliminary
or final site plan approval for this purpose. The fee percentage shall
be vested on the date that the building permit is issued.

Development fees shall be imposed and collected when an existing
structure undergoes a change to a more intense use, is demolished
and replaced, or is expanded, except that expansion of existing single-family
or two-family residences shall be exempt from development fees, unless
the expansion, enlargement, or improvement leads to the creation of
additional dwelling unit(s). The development fee shall be calculated
on the increase in the equalized assessed value of the improved structure.

Non-residential developers, except for developers of the types of
development specifically exempted, shall pay a fee equal to 2% of
the equalized assessed value of the land and improvements for all
new nonresidential construction on an unimproved lot or lots.

Nonresidential developers, except for developers of the types of
development specifically exempted, shall also pay a fee equal to 2%
of the increase in equalized assessed value resulting from any additions
to existing structures to be used for nonresidential purposes.

Development fees shall be imposed and collected when an existing
structure is demolished and replaced. The development fee of 2% shall
be calculated on the difference between the equalized assessed value
of the preexisting land and improvement and the equalized assessed
value of the newly improved structure, (i.e., land and improvement),
at the time final certificate of occupancy is issued. If the calculation
required under this section results in a negative number, the nonresidential
development fee shall be zero.

Nonresidential developments shall be exempt from the payment of non-residential
development fees in accordance with the exemptions required pursuant
to P.L. 2008, c. 46, as specified in the Form N-RDF, "State of New
Jersey Non-Residential Development Certification/Exemption." Any exemption
claimed by a developer shall be substantiated by that developer.

A developer of a nonresidential development exempted from the nonresidential
development fee pursuant to P.L. 2008, c.46, shall be subject to it
at such time the basis for the exemption no longer applies and shall
make the payment of the nonresidential development fee, in that event,
within three years after that event or after the issuance of the final
certificate of occupancy of the nonresidential development, whichever
is later.

If a property which was exempted from the collection of a nonresidential
development fee thereafter ceases to be exempt from property taxation,
the owner of the property shall remit the fees required pursuant to
this section within 45 days of the termination of the property tax
exemption. Unpaid nonresidential development fees under these circumstances
may be enforceable by the Township of Montville as a lien against
the real property of the owner.

Upon the granting of a preliminary, final or other applicable approval
for a development, the applicable approving authority shall direct
its staff to notify the Construction Official responsible for the
issuance of a building permit.

For nonresidential developments only, the developer shall also be
provided with a copy of Form N-RDF, "State of New Jersey Non-Residential
Development Certification/Exemption." The developer of a nonresidential
development shall complete Form N-RDF as per the instructions provided.
The Construction Official shall verify the information submitted by
the nonresidential developer as per the instructions provided in the
Form N-RDF. The Tax Assessor shall verify exemptions and prepare estimated
final assessments as per the instructions provided in Form N-RDF.

The Construction Official responsible for the issuance of a building
permit shall notify the Tax Assessor of the issuance of the first
building permit for a development which is subject to a development
fee.

The Construction Official responsible for the issuance of a final
certificate of occupancy shall notify the Tax Assessor of any and
all requests for the scheduling of a final inspection on property
which is subject to a development fee.

Within 10 business days of a request for the scheduling of a final
inspection, the Tax Assessor shall confirm or modify the previously
estimated equalized assessed value of the improvements of the development,
calculate the development fee, and thereafter notify the developer
of the amount of the fee.

Should the Township of Montville fail to determine or notify the
developer of the amount of the development fee within 10 business
days of the request for final inspection, the developer may estimate
the amount due and pay that estimated amount consistent with the dispute
process set forth in Subsection b of Section 37 of P.L. 2008, c. 46
(N.J.S.A. 40:55D-8.6b).

Thirty-three percent of the development fee shall be collected at
the time of issuance of the building permit. The remaining portion
shall be collected at the issuance of the certificate of occupancy.
The developer shall be responsible for paying the difference between
the fee calculated at building permit and that determined at issuance
of certificate of occupancy.

A developer may challenge residential development fees imposed by
filing a challenge with the County Board of Taxation. Pending a review
and determination by the Board, collected fees shall be placed in
an interest-bearing escrow account by the Township of Montville. Appeals
from a determination of the Board may be made to the tax court in
accordance with the provisions of the State Tax Uniform Procedure
Law, R.S. 54:48-1 et seq., within 90 days after the date of such determination.
Interest earned on amounts escrowed shall be credited to the prevailing
party.

A developer may challenge nonresidential development fees imposed
by filing a challenge with the Director of the Division of Taxation.
Pending a review and determination by the Director, which shall be
made within 45 days of receipt of the challenge, collected fees shall
be placed in an interest-bearing escrow account by the Township of
Montville. Appeals from a determination of the Director may be made
to the tax court in accordance with the provisions of the State Tax
Uniform Procedure Law, R.S. 54:48-1 et seq., within 90 days after
the date of such determination. Interest earned on amounts escrowed
shall be credited to the prevailing party.

There is hereby created a separate, interest-bearing housing trust
fund to be maintained by the Chief Financial Officer for the purpose
of depositing development fees collected from residential and non-residential
developers and proceeds from the sale of units with extinguished controls.

Within seven days from the opening of the trust fund account, the
Township of Montville shall provide COAH with written authorization,
in the form of a three-party escrow agreement between the municipality,
the bank, and COAH, to permit COAH to direct the disbursement of the
funds as provided for in N.J.A.C. 5:93-8.

The expenditure of all funds shall conform to a spending plan approved
by COAH. Funds deposited in the housing trust fund may be used for
any activity approved by COAH to address the Township of Montville's
fair share obligation and may be set up as a grant or revolving loan
program. Such activities include, but are not limited to, preservation
or purchase of housing for the purpose of maintaining or implementing
affordability controls, rehabilitation, new construction of affordable
housing units and related costs, accessory apartment, market to affordable,
or regional housing partnership programs, conversion of existing nonresidential
buildings to create new affordable units, green building strategies
designed to be cost saving and in accordance with accepted national
or state standards, purchase of land for affordable housing, improvement
of land to be used for affordable housing, extensions or improvements
of roads and infrastructure to affordable housing sites, financial
assistance designed to increase affordability, administration necessary
for implementation of the Housing Element and Fair Share Plan, or
any other activity as permitted pursuant to N.J.A.C. 5:93-8 and specified
in the approved spending plan.

At least 30% of all development fees collected and interest earned
shall be used to provide affordability assistance to low-and moderate-income
households in affordable units included in the municipal fair share
plan. One-third of the affordability assistance portion of development
fees collected shall be used to provide affordability assistance to
those households earning 30% or less of median income by region.

Affordability assistance to households earning 30% or less of median
income may include buying down the cost of low- or moderate-income
units in the municipal fair share plan to make them affordable to
households earning 30% or less of median income.

No more than 20% of all revenues collected from development fees
may be expended on administration, including, but not limited to,
salaries and benefits for municipal employees or consultant fees necessary
to develop or implement a new construction program, a housing element
and fair share plan, and/or an affirmative marketing program. In the
case of a rehabilitation program, no more than 20% of the revenues
collected from development fees shall be expended for such administrative
expenses. Administrative funds may be used for income qualification
of households, monitoring the turnover of sale and rental units, and
compliance with COAH's monitoring requirements. Legal or other
fees related to litigation opposing affordable housing sites or objecting
to the Council's regulations and/or action are not eligible uses
of the affordable housing trust fund.

The Township of Montville shall complete and return to COAH
all monitoring forms included in the annual monitoring report related
to the collection of development fees from residential and nonresidential
developers, payments in lieu of constructing affordable units on site,
and funds from the sale of units with extinguished controls, barrier-free
escrow funds, rental income, repayments from affordable housing program
loans, and any other funds collected in connection with the Township
of Montville's housing program, as well as to the expenditure
of revenues and implementation of the plan certified by COAH or approved
by the court. All monitoring reports shall be completed on forms designed
by COAH.

The ability for the Township of Montville to impose, collect,
and expend development fees shall expire with its substantive certification
or judgment of compliance unless the Township of Montville has filed
an adopted housing element and fair share plan with COAH, has petitioned
for substantive certification, and has received COAH's approval
of its development fee ordinance. If the Township of Montville fails
to renew its ability to impose and collect development fees prior
to the date of expiration of substantive certification or judgment
of compliance, it may be subject to forfeiture of any or all funds
remaining within its municipal trust fund. Any funds so forfeited
shall be deposited into the New Jersey Affordable Housing Trust Fund
established pursuant to section 20 of P.L. 1985, c. 222 (N.J.S.A.
52:27D-320). The Township of Montville shall not impose a residential
development fee on a development that receives preliminary or final
site plan approval after the expiration of its substantive certification
or judgment of compliance, nor shall the Township of Montville retroactively
impose a development fee on such a development. The Township of Montville
shall not expend development fees after the expiration of its substantive
certification or judgment of compliance.